Why easy flow of money is worrying economists

The consequence of a world flooded with easy money seems to be worrying business leaders gathered at the annual World Economic Forum meetings in Davos.

In a discussion titled "The Global Financial Context", leading titans of the global banking industry sounded rather concerned about the trillions of dollars central banks have been pumping into the financial system and the impact it could have in the long run.

Regulator-turned-banker and now chairman of UBS, Axel Weber, was most scathing in his criticism of the monetary easing stance adopted by central banks across the world. He said there was an absolute need to manage runaway expectations from central banks and understand that they cannot resolve solvency issues. He said banks were trying to solve the current problem by increasing leverage, which he felt was akin using the problem itself as the medicine. Weber said economies are just buying time and living at the expense of the future generations. He added that he "wasn't in favor of short-term fixes that would increase the problem at a much higher level down the road".

IMF's deputy managing girector Min Zhu echoed Weber's views, saying that the low interest rate environment and the resultant debt overhang were, in fact, the new challenges that were emerging this year, even though policy actions through the past year have ensured that global risks have reduced.

Jamie Dimon, the flamboyant CEO and chairman of JPMorgan Chase, on the other hand, was of the view that while central bank actions have brought the US back into good shape, fiscal policy needs to go hand in hand with monetary easing and there was a need for sustainable growth and job creation to happen, to make the central banks' role a bit easier.

He said he hoped that 1,000 years down the line, should a book be written on QE3, there would be a line which would say it was the greatest thing that happened.